Thursday, July 5, 2012

Do Chinese Rate Cut indicate severe slowdown of Economy?

This morning China announced that it was cutting its 1-year benchmark lending rate by 31 basis points to 6 percent and 1 year benchmark deposit rate by 25 basis points to 3 percent.

But what are the larger implications of this? And what will the central bank be watching for in the coming weeks?

Ting Lu, China economist for Bank of America-Merrill Lynch writes that while the rate cut itself is good news to markets, investors might be concerned about whether June and second quarter data will come in worse than expected.